Although it may sound impressive, getting included in a well-known list of the most sustainable corporations in the world might not actually mean that much. An analysis in the current issue of The CPA Journal asks whether sustainability rankings are consistent across three leading publications that rank them. According to the authors’ in-depth analysis of rankings published in Newsweek, Forbes, and the Reputation Institute, the answer is no.
The authors note that there has been a proliferation of independent published ratings for corporate social responsibility performance in recent years. However, since CSR reporting in the US generally isn’t compulsory, businesses can cherry-pick positive information to include, the authors point out. In addition, most CSR reports still tend to be stand-alone rather than integrated into financial reports.
For their analysis, the authors examined 2015 rankings from Newsweek, Forbes, and the Reputation Institute. Only 12% of the companies included appeared on all three. That lack of commonality prevented the authors from performing a statistically valid analysis. Scatter plots diagrams show so few commonalities that the authors argue “it’s even difficult to claim there is such a thing as the ‘Top 100’ companies.”
The underlying methodologies used to identify, rank, and score each company varies — and so do the KPIs and the weighting percentages of categories, the authors say. For its Green Rankings, Newsweek partnered with Corporate Knights and HIP Investor. Companies were scored on their performance in eight categories including combined energy productivity, GHG productivity, water productivity, and waste productivity.
The Forbes list of the world’s most sustainable companies in 2015 also relied on research from Corporate Knights, a media and financial research company based in Toronto. However, different metrics were used, including “innovation capacity” and “leadership diversity.”
The Reputation Institute’s Global RepTrak 100 is an annual study first published in 2011 that “measures the reputation of the 100 most highly regarded companies across 15 countries.” The results are based on thousands of interviews with consumers to find out how the public perceives various aspects of companies, including their leadership, products and services, workplaces, and corporate citizenship.
The CPA journal authors point out that using generally accepted sustainability reporting standards, such as those put forth by the Sustainable Accounting Standards Board, would help investors and consumers gain confidence in socially-responsible investing as a way to promote meaningful progress. Auditing standards for CSR reports could also make a difference. Overstating sustainability performance can result in more problems than bad PR since so many major business decisions are currently based on CSR reports. “For global markets to work effectively,” the journal authors write, “the information provided by rating/ranking agencies must be transparent and consistent.”